Early History
The government of South Korea in the early 1960s began a new economic strategy which required huge corporations called "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were intended to decrease the trade deficit the nation was going through while helping to bolster the nation's production. This was a plan which had already been successfully used y both Taiwan and Hong Kong, the Far East competitors of South Korea. The company Daewoo had a significant part in this effort to enhance the importance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was amongst these businesses which benefited during 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the country's large labor force, its primary asset. By focusing on labour-intensive businesses, such as clothing and textile, the business yielded high earnings. The corporation's factory in Pusan made 3.6 million shirts each and every month. The corporation also made simple manufacturing machines, which were also labour intensive. Throughout this time, Daewoo helped to boost South Korea's level of exports, which were growing almost 40 percent per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the country's economic recovery lasted from the year 1973 to nineteen eighty one. This took place at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further expand Korea's exports while at the same time making components which had to be imported previously. Domestic components manufacturing helped to strengthen domestic businesses and make possible a national defense industry.